Farming into a Tenement
An ability to farm into a tenement of Derivative Mining right allows concessions in relation to the duty payable on an interest that is transferred once the farm-in criteria have been met.
However 28 November 2018, the Minister for Finance announced proposed amendments to the transfer duty concession for farm-in agreements involving tenements. The proposed legislation will be back dated to this date.
No legislation is currently available. However a circular of the intending scheme is available and highlights important concepts if drafting a Farm-in agreement.
Get it wrong and the concession would not apply.
“A farm-in agreement is an agreement between a holder of a mining tenement (farminor) and another person which entitles the other person to acquire an interest in the tenement (or a derivative mining right) after spending an amount on exploration and development of the tenement.
Broadly, the conditions that must be met for an agreement to qualify for the concession are
- the person must spend the specified exploration amount after the agreement is made
- the person can only have a right to acquire an interest in the tenement after the specified exploration amount has been spent (that is, the person cannot acquire an upfront interest) and
- the mining tenement must be held with the farminor (in other words, the person cannot earn a 100 per cent interest in the tenement).
Exploration amount is defined to mean an amount to be spent, after the agreement is made, on exploration or development of the mining tenement carried out after the agreement is made.
Nominal duty of $20 applies to an eligible farm-in agreement if there is no consideration for the transaction other than the exploration amount. Duty does not apply to the transfer of an interest in a tenement under a farm-in agreement if the specified exploration amount has been spent.”
(extract from OSR circular 19)